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Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: Lucretius who wrote (39294)	6/12/2000 9:56:00 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 42523

Yet another sign of severe stress in the credit markets (from today's WSJ): interactive.wsj.com Defaults on Convertible, Junk Bonds In May Hit High for the Year So Far By JENNIFER ABLAN Dow Jones Newswires NEW YORK -- May had the highest number of defaulters so far this year in the convertible and junk-bond markets. There is no sign of a letup, especially from shakier issuers that sold debt in the more relaxed credit environment of 1997 and 1998. Bus-operator giant Laidlaw Inc., waste-management company Safety-Kleen Corp. and footwear maker Converse Inc. were among the 20 defaulting in May that had issued either junk or convertible debt during those years, according to Moody's Investors Service. In June, the seven defaulting so far, including American Architectural Products Corp., Iowa Select Farms LP and Specialty Retailers Inc., all involve issues from 1997 and early 1998 as well, Moody's added. He noted that there may be an overstatement in Moody's default rate as several of the May defaulters had more than one bond outstanding. Nonetheless, "Many of the defaulters in 1999 came from the Class of 1997 and early 1998, and going forward, the survivors continue to be at more risk this year and next because they will be reaching the critical age where risk of default is at its highest," added David Hamilton, risk-management analyst at Moody's. Historically, the fourth year of the life of a corporate bond is the riskiest for default. Moody's speculative-grade issuer-based default rate, which measures convertible and junk bonds, was 5.4% for the 12 months ended May 31. Its recent peak was 6.06% in October 1999. It isn't just the preponderance of lower-rated credits that is causing defaults to rise, but the sheer number of issues outstanding, Merrill's Mr. Fridson said. Junk-bond issuance peaked at a record $140 billion in 1998, according to Thomson Financial Securities Data of Newark, N.J. It was $113.1 billion in 1997. Last year, junk, or high-yield, issuance fell to $95.1 billion amid a string of investor withdrawals from high-yield mutual funds, an increase in bankruptcies and rising interest rates. The issuance of junk bonds from U.S. companies has dropped to $20.9 billion so far this year from $53.6 billion in the year-earlier period. But as the junk market closed up, the convertible market embraced highly speculative issuers. Convertible bonds are hybrid securities, exchangeable into shares at a set price at a later date. Issuance of convertibles jumped to $40 billion last year from $34 billion in 1998. The silver lining: "Some of those issuers from the Class of 1997 and 1998 have been resolved in default," said Jeffrey Koch, high-yield portfolio manager at Strong Funds in Milwaukee, "but at least we know that new problems are not being made for our market."